On the surface, CAISO’s Extended Day-Ahead Market and SPP’s Markets+ will take similar approaches to accounting for greenhouse gas emissions — but important differences remain.

That was a key takeaway from a Dec. 16 webinar hosted by the Western Interstate Energy Board, where designers from both grid operators discussed how each market will deal with the patchwork of GHG pricing, accounting and reporting requirements across different Western states.

While California and Washington are currently the only two states with active carbon pricing policies, several others have carbon reduction goals and other climate regulations that utilities must meet.

That leaves EDAM and Markets+ with a common goal: to implement GHG tracking and reporting in a way that accounts for different approaches to reducing emissions.

CAISO’s Approach

Developing a GHG accounting mechanism for EDAM “wasn’t necessarily a new challenge” for CAISO because California has had a cap-and-trade program in place since 2014, Anja Gilbert, a lead policy developer at the ISO, said during the webinar.

But despite CAISO’s experience dealing with GHG accounting, it faces some new challenges in accounting for emissions in EDAM, particularly involving how to track emissions in states that don’t price carbon.

Key among those challenges is implementing a market mechanism that ensures a state or load-serving entity is only served by generation that meets a certain emissions threshold.

“This is really relevant for states that have climate policies not based on the price of carbon but might have reduction goals over time,” Gilbert says. “There’s a question of if that does need to be reflected in the market.”

Another challenge has to do with unspecified imports being valued at an unspecified emissions rate.

“It doesn’t provide that level of clarity in terms of what generation is really serving that load,” Gilbert said. “That high emissions rate could undermine showing progress toward an entity’s climate goals.”

In response to those challenges, CAISO has proposed to create a residual emissions rate, which would represent a dispatch-weighted average emissions rate of the market supply and allow market participants to reflect and account for the energy and associated emissions for which they’re responsible. Under this framework, leftover energy in the market would go into the residual supply and the emissions rate would be the average of the residual mix.

To respect state preferences, the market’s optimization won’t incorporate GHG costs outside of California and Washington, but CAISO’s market design does incentivize generators to make supply available to those states. For example, if a solar resource in Arizona wants to serve load in California and receives a GHG award, the generator is paid the marginal GHG price paid for by California load.

SPP’s Approach

Over the past year, SPP has been in the process of developing a design for GHG tracking and reporting, and it provided an overview of its approach, which is similar to CAISO’s.

Gentry Crowson, a lead market design engineer at SPP, said the Markets+ GHG framework rests on two “pillars” of pricing design and a tracking and reporting service.

“These two pillars are really going to enable the footprint to be respective of state programs that are in place, as well as with state GHG reduction goals that are also in place,” Crowson said.

SPP’s GHG tracking and reporting “vision” aims for comprehensive reporting through the centralized Market Emissions Tracking and Reporting (METra) application, Crowson explained. The system’s design intends to give Markets+’s load-responsible entities (LREs) the right to claim resources and energy they own or have contracted for, in addition to ensuring that the market accounts for all generation and associated emissions in one way or another.

The first step in SPP’s design approach is called the “mapping” step, where LREs’ registered resources are modeled in a commercial model and matched to a corresponding resource portfolio. In the second step, reporting entities have the option to bring in or send out other resources by submitting them into the METra portal. The third step is to establish a contract between the buyer and seller that is then reflected into LREs’ resource portfolios.

After the market runs and market operators and participants have a better understanding of the actual output, any generation that exceeds the load amount is deemed excess energy and is allocated to a residual energy report, similar to CAISO’s method.

“Once the market runs and you’re looking at a load-responsible entity’s resource portfolio, if that load-responsible entity has any excess energy, we had to come up with options to figure out how to calculate this residual energy pool as we pull together these emissions,” Crowson said.

The Markets+ GHG Task Force unanimously endorsed the tracking and reporting design in September, and the Markets+ Participants Executive Committee approved it in November.